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How to approach your financial adviser

LiveMint 06-04-2017Kayezad E. Adajania

Choosing a financial adviser is as important as choosing the right investments. If the former is good, the latter is taken care of.

The right way to engage with your financial adviser

A skilled planner can help you figure out your financial goals and bring them to reality with deft planning of your money box, investments, insurance and loans. The service comes for a fee so it’s important to know the Dos and the Don’ts of dealing with a financial planner.The right way to engage with your financial adviser

Graphic by Paras Jain/Mint

How do you give recommendations? Ideally, your planner should not start talking about which products you need to buy or sell, right at the start of your relationship. A money box needs to be in good shape before you can start putting your money in products. Measures like trying to reduce debt, putting in place emergency money, adequate insurance—especially health insurance—are the necessary things a planner should look at first.

Steven Fernandes, a Mumbai-based certified financial planner, says that many times investors come with peculiar problems that need to be sorted out first. “A year or so back, a 35-year-old man came asking for financial planning services. He had good income but wasn’t able to save a single rupee because he had multiple loans. He even had credit card loans. I helped him restructure his loans and close a few.”

A written document—known as investment policy document in financial advisory parlance—goes a long way in demonstrating your planner’s professionalism in her approach. Ask for this document.

Who will handle your account? Will your adviser directly handle your money box or will there be a relationship manager who will manage your investments? Neither is a bad option per se. In a recent interview with Mint, Priya Sunder, director, PeakAlpha Investment Services Pvt. Ltd, a Bengaluru-based financial advisory, had said she prefers to handle the more complicated cases, a client undergoing a divorce, for instance. Other cases are handled by her firm’s relationship managers. “No single planner should take on more cases than what she can sincerely handle and serve,” said Sunder. In smaller firms, the financial planner herself handles your case. In others, it’s a mix of both; the head financial planner meets you once a year but the relationship manager stays in touch through the year.

What if the relationship doesn’t work out? “Just because we handle the investor’s money box, doesn’t mean that their money is with us..... The money belongs to investors…. It is very easy for a client to go to another distributor and the case transfer can happen in minutes,” said Gajendra Kothari, chief executive officer, Etica Wealth Management Pvt. Ltd. Your adviser, too, could also terminate the relationship. “A lot of advice involved in financial planning and clients need to act upon it. But if we observe that clients are not (complying), there is no point in continuing the relationship,” said Kalpesh Ashar, a certified financial planner.

What happens if the adviser dies? Is there someone else in the firm to take care of you? Will the firm, itself, exist? “Many times, I get new clients who have left their banking relationship to join me. They have kids and I owe it to them to ensure that their wealth is taken care of not only in their presence but also their absence. For that to happen, my firm needs to live on, beyond me,” said Ashish Chadha, a Gurgaon-based mutual fund adviser.

Where do you invest your money? It’s okay to ask your adviser where and how she invests her own money. Some advisers, like Kothari, are happy to share their portfolios. “It means we will either swim or sink together. Investors get a lot of confidence this way,” said Kothari, adding that “advisers too need to bring that stake to the game.”

What value-added services do you offer? Many financial advisers are trying to widen their bouquet of services. For instance, some blend life planning with financial planning. Further, it pays if your adviser offers Will planning too. Some offer the facility to view portfolios online, and so on.

How is the adviser compensated? Your adviser has to earn, of course, but you need to know how. Either she gets commission or she charges you a fee. If it is the latter, make sure she routes your investments in direct plans (low-cost mutual funds without distributor commission embedded). Different advisers follow different fee structures but it is typically a percentage of your prevailing assets. Also, she may charge a consultation fee at the time of on-boarding.